Specified Investment Flow-Through Trust

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For a given taxation year, a specified investment flow-through trust (also called a SIFT trust) is a trust that is neither an excluded subsidiary entity nor a real estate investment trust but that meets the following conditions at some time during the year:

  • The trust is resident in Canada.
  • Investments in the trust are listed or traded on a stock exchange or other public market.
  • The trust holds one or more non-portfolio properties.

If a SIFT trust has an establishment in Québec, it must:

  • calculate the non-deductible allocations amount (which is considered to be the amount of allocated non-portfolio earnings) and allocate the amount to its beneficiaries as an eligible dividend;
  • pay income tax on the taxable distributions amount at the same tax rate as corporations. If the trust has an establishment in Québec and also has an establishment elsewhere, it must use the business allocation formula used by corporations to calculate the income tax.

The trust can use Schedule E of the Trust Income Tax Return (TP-646-V) to calculate:

  • the deduction it can claim with respect to the portion of its income that is allocated to beneficiaries;
  • the income tax payable on the taxable distributions amount; and
  • the eligible dividends to be designated.

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